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Retail and foodservice – what we know so far

Friday, 20 March 2020

The coronavirus (COVID-19)pandemic is a worrying time for consumers and will impact behaviour both in and out of home. As we are still in the early stages of the pandemic, we are yet to have sight of actual demand data and therefore the purpose of this article is to highlight what we do know now (as of 20 March 2020). We will continue to track and report insights going forward.

It is important to look at both the retail and foodservice environment, with both contributing billions to theUKeconomy on a yearly basis.As many people begin toisolate,the impact onbothofthesechannelsdiffers greatly.

As the impact becomes more apparent,it will be key for us to look at the total domestic markettoseehow demand has been affectedoverall.

Retail

We are strongly expecting grocery sales in retail to have grown in March. In addition to observed stockpiling behaviour, many meals which would normally be eaten in foodservice have transferred to the home.

According to a study by MCA/HIM,​one-thirdof consumers are claiming to stockpile food in preparation and 67% are concerned about retailers running out​

Long-lifecategories are currently preferred:tinned, frozen and dried goods. This has the potential to positively impact categories such as long-life milk, powdered milk, frozen meat and frozen chips. It may also benefit meat cuts that lend themselves to bulk cooking or freezing,such as mince, diced,etc.

Although this peak in retail sales will subside, it is likely that retail demand will remain higher than usual, as people increasingly work from home and make fewer visits to foodservice

Dependency on online delivery has increased,with retailers reportingthatdelivery slotsare beingbooked weeks in advance. Ocado hastemporarily suspendedits website to help it cope with demand.Meal-kit companies are also reporting an upturn in sales.

According to a study by MCA/HIM,​23% of shoppers plan to increase their use of online grocery shopping

The surge in demand has seenaction from retailers.Manyhave introduced product limits,priority access for elderly customersandcuttingback on the range of products offered to improve efficiencies.Morrisons plansto create3,500newjobsto work in delivery and distribution centres,utilising new resource to launch food parcels, more delivery slots anda call centre for phone orders.Sainsbury’s hasannounceditwill take staffoffmeat, fish and bakerycounters to be utilised elsewhere in store. We will publish analysis of this impact as data is collected

Foodservice

As of midnight on the 20th March all bars, pubs, cafes and restaurants have been ordered to close. They are able to provide takeaways.

The majorityoffoodservice revenue(AHDB estimates80%) comes from the eating-out market.What we know about this channel is:

Before this announcement, eating-out sales were declining as footfall decreaseddramatically.According toWirelessSocial,in the seven days to 20 March there was a 50% fall compared with the same seven days last year

Early signs show thatcertain eating-out channelsmaybe worsthit:

London, city centres, travel hubs and universities

Pubs, local independents and supermarket/department stores, asthese arevenues most popular with the over-70s

Eating-out channels have respondedto the new socially distant environmentby offering foodtogo, meal kitsor home-delivery options. Planning rules were relaxed to allow all pubs, restaurants and cafes to offer takeaway or food delivery, without prior permission. This is still the case following the announcement on the 19th. Fast-food outlets are well placed to service the off-premises market

A survey of Chinese consumers by Kantar found that, once they were free from lockdown, the first activity they wanted to do was go to a restaurant, cited by 63% of respondents

A smaller but integral part of the market (currently at 8% share of foodservice) is delivery. What we know here is:

Fooddelivery was already in double-digit growth (+18% spend in 2019). With people having to stay at home, coupled with the initiatives mentioned above from restaurants,this growthwill inevitably accelerate

Delivery companies,such as Deliveroo and JustEat,quicklyreacted bylaunchingcontactless delivery, initiatives to support grocery shopping and reassurance about hygiene levels, as well as extra precautions. Restaurant take-up of these delivery serviceshasincreased

Food delivery lends itself to certain dishes and food categories:beef,due to burgers (a Five Guys’burger is thenumber oneDeliveroo order in the UK), dairy,due to pizzas,and potatoes,due to fishandchips

While a gain infood deliveryis positive for the foodservice market because of its overall size,gains hereare not likely tocompensateforlossesseen in the eating-out market​